Twitch and PayPal

Illustration by William Copus (Licensed)

The payment company has updated its terms in some countries, but it doesn’t make a difference to Twitch streamers. Here’s why.

Ambiguous wording in PayPal's recent update to its user agreement in some countries left the Twitch community wondering if the company was finally doing something about chargebacks on donations.

Chargebacks have been a big issue on Twitch for quite some time. Basically, a viewer will donate money to a streamer, then request the money back at some point afterwards. They'll do this either because they simply couldn't afford the donation in the first place, or because they’re trolling. If those chargebacks get approved, the broadcaster will incur a fee on their PayPal account.

And of course, if that streamer has already withdrawn the funds, it could put their account in the negative—and perhaps very deep into the negative, if the donation was particularly large. This makes donations on Twitch an often stressful and unreliable source of income.

Unfortunately, if you’re a streamer hoping that chargebacks were suddenly a thing of the past, we've got some bad news: they’re not. PayPal's updates to its user agreements changed absolutely nothing. In fact, PayPal isn’t even the one responsible for chargebacks in the first place.

Here’s why, and what you can do to try and minimize any donation issues on your stream.

PayPal donation buttons

Donation buttons were introduced to PayPal as a way for non-profit organizations to receive donations from people who want to support their cause—companies like the Red Cross and Make-A-Wish. These do not count as regular transactions like selling a product (which has a merchant transaction fee of 2.9 percent and 30 cents in the U.S. and 3.9 percent and a fixed fee internationally), since the person giving the money does not get anything in return.

Donations processed by PayPal do incur a transaction fee, as the company has to pay standard transaction fees itself. You can find information about these fees on PayPal’s website.

The PayPal user agreement updates

PayPal user agreements did not have anything about donations laid out in express terms previously. Now, PayPal specifically states that, in certain countries, donations will not be covered under the buyer or seller protection portions of the agreement, with the changes going into effect later this year.

Note that while the donation wording has only been included in certain countries’ agreements this is just a clarification of existing PayPal policies. That means broadcasters won’t see any substantive change in how chargebacks are dealt with.

“We regularly make updates that do not substantively change our relationship with customers,” a PayPal spokesperson tells Dot Esports. “But instead clarify language and promote a more consistent customer experience around the world."

The updates essentially mean that viewers who donate money cannot chargeback through PayPal itself, because if they file a purchase protection claim and say that they didn’t get what they said they’d bought, PayPal sees it as a donation and it doesn’t qualify. Likewise, the seller protection means that streamers are not covered if a viewer claims the purchase was an unauthorized transaction. Another thing to note is that the term chargebacks refers to claims filed with credit card companies directly, with PayPal using the term Purchase or Buyer Protection claims.

Some of the countries and regions that saw the donation exclusion added to their user agreements includes the European Union, Switzerland, Russia, Japan, and Mexico. The U.S. user agreement has not been amended, as each country is on a different schedule for updates. But, as mentioned above, PayPal’s policy on donations is blanket across the whole company, even if it’s not laid out in express terms in the user agreement for a country.

"When buying with PayPal, customers can be assured they are not responsible for costs should they not receive the item they actually purchased or it was significantly different from what was described,” a PayPal spokesperson tells Dot Esports.

“And when selling with PayPal, merchants who meet the requirements are not liable if a buyer claims the purchase was an unauthorized transaction or they did not receive the item. Since customers are not purchasing something when they make a donation or tip, these transactions are not eligible for purchase protection and refund requests would be denied."

PayPal donations and Twitch

While chargebacks are not covered under the PayPal user agreement, there is another way viewers can get their donations back—by filing through their bank or credit card company directly.

If a viewer uses PayPal to make the donation, then requests a chargeback from their credit card company or bank, PayPal works with the bank or card provider to give information about the transaction, so it can determine whether the claim is legitimate. But at the end of the day, the bank or credit card company authorizes the chargeback themselves, which then pulls the money out of the broadcaster’s PayPal account and incurs a $20 chargeback fee. If the streamer’s PayPal balance does go into the negative, there is no overdraft fee or negative balance fee, they just receive a notification that their account is in the negative.

Sometimes streamers will be notified that a viewer is trying to chargeback a donation, but there is no standard for dialogue, and broadcasters might not be contacted at all if the claim is flat-out denied. If a broadcaster does receive a notification about a chargeback they usually have 10 days to answer the claim. Chargebacks from a bank or credit card company could be approved for a few reasons, like if the card is proven to have been stolen.

In a conversation with Dot Esports, PayPal emphasized that, when streamers add a donation button to their stream, they're no longer using the service the way it's intended. It was made to be used exclusively by non-profits.

It’s also always a good idea to keep track of each donation you receive—third-party apps like Twitch Alerts do a good job of this. Be wary of large donations from viewers that you don’t recognize, and don’t withdraw the funds immediately, just in case.

Viewers can file chargebacks 120 or more days after the donation was sent. While it’s usually resolved within a few weeks, it can sometimes take over 75 days depending on the instance.

PayPal is keeping an eye on how Twitch and donations relate through its service. But it isn't guaranteeing any changes or safeguards to the way it works, since donations are intended to be used by non-profits.

“PayPal is a fan of the Twitch community and is proud to be accepted as a form of payment on Twitch,” a spokesperson for the company tells Dot Esports. “Ultimately, Twitch streamers should always exercise caution when accepting or sending donations to people or organizations they are not familiar with.”

Twitch is aware of the issues with donations on the platform, and recently announced its own microtransaction system, which it calls "Cheering." Viewers can purchase “bits” through Twitch directly, then use them to “cheer” for a broadcaster (if they have the beta enabled), with higher donations giving a bigger animated emote in chat, and a percentage of the amount donated to the streamer directly. The minimum purchase is $1.40, which gets the viewer 100 bits.

The biggest complaint with this system is that it’s not always obvious how much the Cheer or donation is actually worth—while it seems like a huge number and the emote is very noteworthy, when someone cheers using 10,000 bits for example, that equates to $126 if they used the bulk discount. Twitch gives the streamer one cent per every bit used to cheer for them.

Neither system is perfect. But for the time being, they’re the only two options available. So if you’re a streamer, just make sure you know what you’re getting into before encouraging your viewers to donate through one of them.

Update 4:50pm CT, Aug. 30: Twitch provided the following statement about the difference between 'donations' and 'tips.'

"The difference between tips and donations on Twitch are that donations are given to charities, and therefore can be written off on your taxes, whereas tips are typically voluntary monetary offerings for a service or to show appreciation."

Promoted Stories Powered by Sharethrough
Mario World speedrunner does the entire course blindfolded
Remember all those hours as a kid you spent battling your way out of Yoshi's Island? Now a Super Mario World speedrunner , Twitch user pangaeapanga, is here to remind you how excruciating some of those levels were—by successfully completing the entire game while blindfolded.
From Our VICE Partners

Pure, uncut internet. Straight to your inbox.

Thanks for subscribing to our newsletter!